Latest Proposal To Revise Homestead Law Is Flawed

January 28, 1985

ONCE AGAIN, a proposal to correct a serious flaw in Florida`s homestead tax exemption has been put forth. Unfortunately, once again, the proposal itself is also badly flawed.

Currently, the first $25,000 in appraised value of all homes is tax-free due to homestead exemption. State Rep. John Grant, R-Tampa, wants lawmakers to approve, and voters to ratify, a constitutional amendment to tax the first $10,000 in value on each home, letting the next $25,000 in value be tax-free under homestead exemption. This would apply to everyone, except those aged 65 or over, who would continue to enjoy the existing exemption on the first $25,000 in value.

Grant`s idea is flawed for three reasons:

(BU) First, it discriminates against younger people by granting an exemption arbitrarily to older residents without considering their ability to pay taxes. Many older people can well afford to pay property taxes.

(BU) Second, it makes no provision to provide tax exemption for the poorest of the poor who own the smallest homes. Some sort of ``circuit-breaker`` should be considered for owners of tiny homes who live below the poverty line.

(BU) Third, the idea amounts to more patchwork repair on the tattered fabric of Florida`s tax system, which really needs comprehensive reform.

Grant`s idea is well-intentioned, though. He is trying to address a severe problem that has been festering for half a decade, since the exemption was boosted from $5,000 to $25,000. Grant calls it ``representation without taxation`` -- the fact that many people with smaller homes who could afford to pay some property taxes now pay none because of homestead exemption.

This is especially troublesome in 23 rural North Florida counties, where owners of nearly all homes pay no taxes at all because they are worth less than $25,000. By contrast, owners of nearly all the homes in urban Broward and Palm Beach counties pay at least some property taxes because of higher values. Tax-rich counties like these also are forced to financially subsidize rural school systems, which lack an adequate property tax base of their own. More than 362,000 Florida homeowners pay no property taxes, while many can afford to pay something to finance government services they require.

Before making any change in homestead exemption or any part of the tax system, lawmakers should see that every tax, exemption and loophole is studied. The reasons for each tax`s adoption, its fairness, its collection costs, its response to economic cycles, its reliability as a funding source and its appropriateness in the future should be examined. Tax reform also should include adoption of a limit on state spending, linked to people`s ability to pay as measured by growth in state personal income.

Lawmakers must resist the temptation just to ``fix`` homestead exemption or do any more piecemeal tinkering with the tax system, because that tinkering has caused severe inequities and unfairness.